I have been fortunate to stay away from credit cards and have no credit card debt. I stayed away from credit cards beacuse my mother always told me to not get a credit card unless I have an income to pay it back. Now, student loan debt, that’s a different subject. Most young people have some form of educational debt. When I was taking out loans for undergraduate school, I never really thought too much about paying the money back – I was just thinking about getting my books, paying for school and having money for living expenses. It has been almost a year since I have graduated from college with my B.S. in journalism and those student loans are on my mind a lot more often these days.

I have received an overwhelming amount of letters and phone calls warning me that my student loan deferment will be soon ending and it will be time to start making payments. Thus far, I have managed my student loan debt pretty well, and I want to help college students make smart decisions about student loans. Below are tips for managing student loan debt from the very beginning of college to after graduation.

Average educational debt statistics:

Two-thirds (65.6%) of 4-year undergraduate students who graduated with a Bachelor’s degree in the 2007-2008 school year had an average of $23,186 in student loan debt (excluding PLUS Loans but including Stafford, Perkins, state, college and private loans).

The median cumulative debt among graduating Bachelor’s degree recipients at 4-year undergraduate schools was $19,999 for the school year of 2007-2008.

Most undergraduate students graduate with close to $20,000 in student loan debt. This is a 108% increase in just a decade.

Students who graduate from professional or vocational two-year programs are in debt as well. Many of them are responsible for nearly $10,000 in student loans.

Just because you can borrow more doesn’t mean you should.
Lenders will provide you with money beyond what you actually need. Borrow only what is required to live comfortably and be wise – remember, you will have to pay this money back in the future, plus interest. Federal student loans offer low interest rates, typically not surpassing 7 %, but after a few deferments, that interest can add up to a lot. The best thing to do is create a budget for your financial aid funds and stick to it. Treat yourself, but not excessively. Enjoy life but still be frugal.

Max out your subsidized loan borrowing power first.
Federal student loans typically come in two types: Subsidized and unsubsidized. Subsidized loans are loans where the government pays the interest on the loan for the duration of the time that you are currently in school. On the other hand, unsubsidized loan interest begins accumulating immediately once you receive the loan. To save yourself some money in the long run, max out your subsidized loan borrowing power first. In the long picture, the reality is that you are most likely going to need both types of loans to get through all four years of college.

Pay interest on your unsubsidized loans if you can.
If you find yourself with extra money every month and are able to pay your unsubsidized loan interest payments comfortably, go for it! Trust me, you’ll thank yourself later. Once you have graduated and are trying to establish a life for yourself post college, you will find it useful having lower loan payments when it comes time to repay your principle loan balance.

Stay away from Private loans.
Do not pass go, do not collect $400! If possible, try your best to avoid private loans. While federal student loans are easily eligible for forbearance an unlimited amounts of times, most private loans are not. This means you’ll be hit with loan payments on an annual $35,000 entry-level salary straight out of college and find yourself broke and living paycheck to paycheck. If you are forced to take out private loans, borrow the least amount possible and pay off the balance of these loans first.

Pay off your credit card debt or don’t accumulate it in the first place.
Many students go away from college with little to no financial education and no parents around to tell them what to do, and in turn, end up racking up a fair amount of credit card debt. My first advice is to live off of funds from a part-time job or student loan money and do NOT get a credit card. If those options aren’t realistic for your lifestyle, get one credit card and use it only if you know you can pay the balance off in a timely manner. As you already know, interest rates on most credit cards are often high (15 – 30%). If you’re making the minimum payment or something close to it, interest accumulation will make paying off your balance very difficult. If you have additional borrowing power on a federal student loan, borrow the extra amount to pay off your credit card in full. This allows you to use a lower interest rate loan to pay off a higher interest rate loan. Being realistic about your finances and sticking to your budget will help keep you out of major credit card debt and you will thank yourself later in life. Always remember, budget and always pay off your credit card in full. If you can’t afford to pay off the balance in full every month, you do not need what you are buying and you need to take a closer look at your budget.

Consolidate your loans while you’re still in school.
Once you have graduated from undergraduate school, you are going to start getting a lot of letters in the mail from different lenders about all the different loans that you received throughout your college career and it is going to be uber confusing and time consuming. The Higher Education Act (HEA) under the U.S. Department of Education offersa loan consolidation program for federally insured student loan debt. Under this program, a borrower’s loans are paid off and a new consolidation loan is created. This simplifies your loan repayments by combining several types of Federal education loans (that may have different terms and repayment schedules or may have been made by different lenders) into one simple loan. Trust me, this is something you want to do– having all of the bills and payment history come from one lender makes record keeping a lot easier.

About the Author

Samantha Savory is a 20-something-year-old recent communications graduate whose mission is to financially succeed and thrive in this economy. She writes about personal finance and anything related to shopping and saving money.

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